Not sure about the differences between bookkeeping and auditing? Understanding the roles they play can help you keep your finances accurate and your business on track. In this article, we’ll break it down for you.
Key Takeaways
Bookkeeping records daily transactions, so you can stay organised and track where your money goes.
Auditing checks these records to ensure accuracy and catch mistakes or fraud, giving you confidence in your financial reports.
Bookkeeping keeps records accurate and organised, while auditing verifies these records for accuracy and compliance.
What is the Difference Between Bookkeeping and Auditing?
Although bookkeeping and auditing are important for financial management, here are the key differences that you should know:
Definition
Bookkeeping: Bookkeeping helps you keep track of all the money coming in and going out every day. It’s like keeping a daily diary of your business's financial activities.
Auditing: This is about double-checking the financial statements and records to make sure everything is accurate and follows the rules. It’s like having an inspector review the diary to see if it’s truthful and correct.
Purpose
Bookkeeping: Bookkeeping helps keep a clear and organised record of every financial transaction, so the business knows exactly how much money it has, owes, and spends each day.
Auditing: The goal is to check if the financial records are honest and accurate. It’s like verifying if the numbers in the records are correct and if the business is being truthful about its financial health.
Work Scope
Bookkeeping: It involves writing down every sale, expense, and payment. It also means keeping organised records (like a notebook or spreadsheet) and creating basic reports to show how much money the business made or spent.
Auditing: Auditing carefully checks those reports to see if everything is accurate. It also involves making sure the business is following the rules and that there are good systems in place to avoid mistakes or fraud.
Timing
Bookkeeping: It’s a continuous, daily process throughout the financial year.
Auditing: It is conducted periodically, often annually or quarterly, after the completion of financial statements.
Responsibility
Bookkeeping: Performed by internal staff or hired professionals responsible for accurate financial record-keeping.
Auditing: This is carried out by independent external auditors or internal auditors who provide an unbiased evaluation of financial records.
Regulatory Requirements
Bookkeeping: Not always legally mandated but essential for effective financial management and tax preparation.
Auditing: Often legally required, especially for publicly traded companies, to ensure transparency and protect stakeholders' interests.
Can an Auditor Do Bookkeeping?
No, an auditor cannot do bookkeeping for the same company they are auditing because it would create a conflict of interest. They need to be independent to provide an unbiased opinion. However, an auditor can do bookkeeping for a different company that they are not auditing.
RELATED: What Can A Bookkeeper Not Do?
What We Think
Bookkeeping and auditing are both important, but they do different things. Bookkeeping keeps track of every sale, expense, and payment to make sure your records are accurate.
Auditing checks these records to make sure everything is correct and follows the rules. It’s like a double-check to catch mistakes or fraud. This is important because it gives you and others (like investors or banks) confidence in your financial reports.
In our experience, having good bookkeeping makes auditing much easier and less stressful. We believe that understanding the difference between these two can help you run your business more smoothly and avoid financial problems.
How JAFA Can Help
We use AI technology for bookkeeping, which makes it easy by automatically recording transactions and organising your financial data in real-time. This saves you time and reduces the risk of errors, so you always know where your money is going.
When it comes to auditing, having accurate and well-organised records is crucial. Our bookkeeping solution ensures that your financial data is reliable and compliant, making the auditing process faster and less stressful.
Contact our expert accountants in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277.
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